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DRR and DRI
Accountancy
When we create DRR out of free reserves, ofcourse we would've kept that amount extracted from free reserves, as DRR, into some or the other bank account , so our bank bal.on asset side would've increased, and can be used to pay off the deb.holders. Then why do we separately create DRI to increase our asset side and use it later to pay off Deb. holders (when increased bank bal., Due to DRR creation, could've been used)?
Answers (4)
DRI is made preferably before the redemption to be more precise when the debentures are issued It's made to meet up the future liability of redemption as you can't be sure that in foreseen future you could have sufficient balance or not for the redemption as so following conservatism you keep the DRI as a back up and later on redemption the same DRI is used You could idealise the way you take the loan from the bank and give some security then subsequent failure leads to selling of the security...
Promotion Market
DRI is made preferably before the redemption to be more precise when the debentures are issued It's made to meet up the future liability of redemption as you can't be sure that in foreseen future you could have sufficient balance or not for the redemption as so following conservatism you keep the DRI as a back up and later on redemption the same DRI is used You could idealise the way you take the loan from the bank and give some security then subsequent failure leads to selling of the security...
Yes but the doubt was, when we create DRR using free reserves, didn't we already put that amt of DRR in a bank or something, so seperately creating DRI would lead to reinvesting that amount again
